A simple guide to the law on confiscation and restraint under the Proceeds of Crime Act (2002)

A simple guide to the law on confiscation and restraint under the Proceeds of Crime Act (2002)

Partner John Binns explains the way confiscation works under the Proceeds of Crime Act 2002 (POCA).

Confiscation: The Basics

The problem with the law:

Confiscation law can be hard to understand, even for lawyers. The main reason is that literally none of the important words and phrases in confiscation law mean what the dictionary says.

Even the word ‘confiscation’ is misleading. When a court makes a so-called confiscation order, it is not identifying property that comes from crime, and telling the owner to give it up. Instead, it is making an order against a convicted defendant to pay a sum of money.

How much?:

The amount of the order is the lower of two figures: the ‘benefit’ that the defendant has obtained from their criminal conduct, and their ‘available amount’.

The word ‘benefit’ does not mean the profit the defendant has made or kept. It is defined as the value of property that has been obtained by them, ‘by or in connection’ with the conduct. That can include property that has since been given away, spent, or seized.

‘Criminal lifestyle’:

In a lot of cases, the court must assume that the defendant has led a ‘criminal lifestyle’, so that everything they have owned, spent, or received in the six years before the case started is assumed to have come from crime.

It is up to the defendant to show that this is untrue, or that it would be unfair to make those assumptions. In practice this can be hard to do.

The ‘corporate veil’:

In some cases, the court will look not only at the defendant’s personal benefit, but also the benefits obtained by a company (sometimes called lifting, or piercing, the ‘corporate veil’).

The rules on this are complicated, but the court will look at things like whether the company had a legitimate purpose, and who was involved in owning and running it.

‘Available amount’:

The ‘available amount’ includes the value of all the defendant’s assets at the time of the order, together with the value of any ‘tainted gifts’.

To be clear, these assets can be entirely legitimate, and still be counted towards the ‘available amount’. In many cases, it will not be possible to deduct the value of personal debts.

‘Tainted gifts’:

Despite the name, a ‘tainted gift’ does not have to be the proceeds of crime, or to have been given to someone for the purposes of hiding it from the court.

Instead, it can include legitimate transfers of assets to third parties, even where some value (though not the full amount) was given in return. The idea is that the defendant is treated as if they had kept any assets they have given away.

‘Hidden assets’:

Because it is up to the defendant to show that his ‘available amount’ is less than their ‘benefit’, in some cases the court will make a finding that they have ‘hidden assets’.

This does not, however, mean that the defendant has hidden anything in fact. They may simply have been unable to prove that they don’t have assets – again, a hard thing to do in practice.

Confiscation Procedures

Section numbers:

Confiscation lawyers and financial investigators (FIs) refer to sections of the Proceeds of Crime Act 2002 (POCA) to describe procedures that can be difficulty for most people to understand.

The following are some of the important ones, referring to Part 2 of POCA (which covers England and Wales).

Third parties:

Where the court is interested in property that a defendant co-owns with someone else, or a ‘tainted gift’ they have made to someone, the other (‘third’) party can have a right to be heard.

The procedure to do this was added to POCA a few years ago. Lawyers and FIs refer to it to by the section number that was added (section 10A).

Information:

Before making an order, the court will require information from the prosecutor (under section 16 of POCA), to which the defendant can reply (section 17).

In practice, it will often require the defendant first to provide a statement of information (section 18). It can also require information from a third party (section 18A).

‘Reconsideration’:

Most defendants are not aware that, where their ‘benefit’ is bigger than their ‘available amount’, the confiscation order itself may not be the end of the story; the prosecutor can come back for more, up to the total value of the benefit.

The procedure for doing this is called a ‘reconsideration’ or ‘revisit’ (POCA section 22), and it often happens where the prosecutor has kept an eye on a defendant’s bank account or the value of their property. The court has a discretion to order a further payment from the defendant at this stage.

‘Inadequacy’:

A confiscation order can also be varied in the other direction, where the defendant can show that they do not have enough assets available to pay it in full (POCA section 23).

This is not meant to be an opportunity to argue that the court got its figures wrong in the first place. Rather, it is for situations where the value of assets (like houses or cars) has gone down since the confiscation hearing.

Restraint Orders

The basics:

Very often, the first a defendant (or a third party) hears about the confiscation process is when they receive a copy of a restraint order, which prevents them having access to all or some of their assets.

The idea of a restraint order is to make sure a defendant can pay an order at the end of the case if they are convicted. It can affect the defendant, a third party they co-own property with, or someone who has received a ‘tainted gift’.

The extent of the order:

Restraint orders can be very unfair, in part because of the way confiscation itself works. For instance, in a ‘criminal lifestyle’ case, or where there is a ‘corporate veil’ issue, the amount of ‘benefit’ it can be designed to restrain might be extremely high.

Although third parties now have a right to be heard at the confiscation stage, when dealing with restraint orders, the court will usually assume that all assets belong entirely to the defendant, and that ‘tainted gifts’ will be used to pay the order.

The detailed provisions:

If you receive a restraint order, it will be important to consider its terms in detail, and to take advice if you can, and as soon as you can.

Among other things, there may be provisions about disclosure or repatriation of assets, and/or scope to vary provisions on living or legal expenses (though not for the costs of advice about the order, or about the case it relates to).

‘Draconian’ Laws

The law of confiscation is sometimes called ‘draconian’; this is because it is meant to be harsh on convicted defendants. But there are still opportunities to argue for more reasonable, proportionate results, both for defendants and third parties.

The first step is to understand the nature of what you are dealing with – not only its harshness, but also its complexity, and the fact that the words involved in it can be misleading. The second step is to get specialist advice, to help you find your way out of the maze.

 

Contact BCL for help with confiscation and restraint orders under POCA.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.

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